The truth about short sales

Buyers often shy away from considering short-sale listings, either because they've had a bad experience or have heard horror stories about the deals that take forever and never close. Buyers' agents sometimes steer their clients away from sales that are subject to the lender agreeing to accept less than what they're owed, because it can mean a lot of work for nothing.

Short sales will probably be a part of the home-sale market for the next couple of years. They provide opportunities for buyers, particularly those attempting to buy a home in a low-inventory market.

Before you enter into a contract to buy a short-sale listing, make sure that you understand the process and set your expectations accordingly. One of the biggest differences between a short sale and a conventional sale is that short sales take longer. Although many lenders are streamlining the short-sale process, it can still take 45 days from contract acceptance to receive lender approval.

Make as clean an offer as possible, but be sure to include contingencies for inspections and appraisal and loan approval. Your contract should also include a short-sale addendum that includes a time frame for lender approval.

Listing agents often want the buyers' contingencies to begin when the offer is accepted by the seller. However, buyers usually prefer to pay for inspections and the appraisal after lender approval. As in all home-sale transactions, these items are negotiable.

Your short-sale offer will stand a better chance of lender approval if you are preapproved for financing. Include verification of the funds needed for your downpayment and closing costs and a preapproval letter from your lender with your offer. The ratified purchase offer and supporting documentation from the seller and listing agent will be submitted to the lender. ...CONTINUED

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